The Black Sea Grain Initiative has facilitated the safe export of more than 30 million metric tons of grain and other food items from Ukraine to global markets. Since it was signed, the initiative has helped to keep global food prices stable and food available and affordable, especially to the poorest nations. However, the deal has been at the heart of a political chess game between Ukraine and Russia, with the United Nations acting as the mediator.
The Origins of the Black Sea Grain Initiative:
The Black Sea Grain Initiative was signed on July 22, 2022, in Istanbul, Turkey, by Ukraine, Russia, Turkey, and the United Nations. The agreement was aimed at facilitating the safe export of more than 30 million metric tons of grain and other foodstuffs from Ukraine to global markets, using three Black Sea ports in Ukraine. The deal was brokered by the United Nations and Turkey to help alleviate a global food crisis worsened by the special military operation(SMO) and blockade of Ukrainian ports.
The Impact of the Black Sea Grain Initiative:
Since the first ship went out on August 1, more than 380 ships have departed to some 37 countries, transporting over 8.6 million tons of cargo carrying life-saving food exports from Ukraine ports. More than 2 million metric tons of food have been exported directly to countries most vulnerable to severe hunger, like Kenya, Afghanistan, Bangladesh, Yemen, Ethiopia, and Somalia. Over 1 million metric tons of wheat have been shipped from Ukraine to low and lower-middle income countries through the Black Sea Grain Initiative. That is the equivalent of nearly 3 billion loaves of bread.
The Black Sea Grain Initiative has allowed Ukraine to ship 32.8 million metric tons (36.2 million tons) of grain, more than half of it to developing nations. It has helped lower global prices of food commodities like wheat after they surged to record highs following the invasion last year. The UN Food and Agriculture Organization Food Price Index recorded a steady monthly decline over the past year, dropping more than 23 per cent from its peak in March 2022.
Although global food commodity prices have generally fallen, many factors influence food affordability and domestic food inflation, including exchange rates. The Initiative has helped reconnect foodstuffs from Ukraine to global supply chains, contributing to lower prices on world markets.
Wheat grain being loaded in Odessa
The Importance and Impact of Ukrainian Grain Exports:
As the world's “breadbasket”, Ukraine is responsible for a significant portion of global exports, providing the majority of imported grains to many countries in Africa and the Middle East. Ukraine is responsible for 46% of global sunflower oil exports, 12% of global corn exports, and 9% of global wheat exports.
Ukraine's grain exports to the EU have had a significant impact on the European grain market, driving down prices and increasing competition. The EU's dependence on Ukrainian grain has made it vulnerable to supply disruptions and price spikes. In recent years, the EU has been seeking to diversify its sources of grain to reduce its dependence on Ukraine. The EU has been importing more grain from Russia, Kazakhstan, and other countries in the Black Sea region. However, the quality of Russian grain has been a concern for the EU, and the ongoing sanctions imposed on Russia by the West have limited its ability to export grain and fertilizer.
Claims of Ukrainian Grain Being Contaminated:
One of the major concerns surrounding Ukrainian grain transit is the perception that it is contaminated. Some European countries have raised concerns about the quality of Ukrainian grain and have urged the EU to take action to ensure that only safe, high-quality grain is allowed into the European market.
These concerns are not unfounded. In recent years, there have been a number of incidents involving contaminated Ukrainian grain. For example, in 2018, Ukraine was forced to recall over 20,000 tons of grain due to the presence of a harmful pesticide.
The European Union Paying Countries to Allow Ukrainian Grain Transit:
Another controversial issue is the EU's payment of countries to allow Ukrainian grain transit. Some critics argue that this practice is unfair and undermines the EU's commitment to fair trade practices. However, supporters of the practice argue that it is necessary to ensure that the EU has access to a reliable supply of grain.
The EU has been criticized for its handling of Ukrainian grain transit, particularly in light of concerns about contamination and quality. Some European countries have raised concerns about the safety of Ukrainian grain and have urged the EU to take action to ensure that only safe, high-quality grain is allowed into the European market.
The Impact of the Black Sea Grain Initiative on Ukraine's Economy:
Ukraine is among the world's top exporters of wheat and other grains, which are ordinarily shipped to markets as distant as Egypt and Pakistan. Russia's invasion last year disrupted the main Black Sea export route, and the UN-brokered deal to lift the blockade has been only partially effective. As a consequence, Ukrainian produce has been diverted to neighboring EU countries: Hungary, Poland, Romania, and Slovakia.
At first, those governments supported EU plans to shift the surplus grain. But instead of transiting seamlessly onto global markets, the supply glut has depressed prices in Europe. Farmers have risen up in protest, and the Ukrainian grain issue has already cost a Polish agriculture minister his job. Restrictions could do further harm to Ukraine's battered economy, and by extension, its war effort. The economy has shrunk by 29.1 percent since the invasion, according to statistics released this month, and agricultural exports are an important source of revenue.
The State of Ukrainian Grain Exports:
In June 2023, Ukraine exported less than 1.4 million tonnes of foodstuffs, nine months previously, it had been exporting about four million tonnes a month. This is partly because Ukrainian farmers are producing less due to the ongoing fighting across large parts of the country.
However, Ukraine's government says Russia has also been delaying cargo ships heading to its ports to load with food products by stopping them to inspect for weapons. There is usually a queue of about 100 ships in the entrance to the Black Sea.
The Impact on Eastern European Countries:
The EU lifted trade restrictions on Ukrainian food exports to member countries at the start of the war to help Ukraine's economy. This caused a glut of grain and other food products in neighboring Eastern European countries. The governments of five of these countries - Hungary, Poland, Slovakia, Romania, and Bulgaria - have complained that the flood of cheap Ukrainian food products has hit their farmers' incomes.
The Threats of Russia to Pull out of the Grain Deal:
Russia agreed to extensions of only 60 days in March and May 2023 instead of the deal's intended 120-day extensions. Now, it is threatening to pull out altogether because it wants Western sanctions to be relaxed to enable its own producers to export more food and fertiliser. There are no specific sanctions against Russian agricultural exports, but Moscow argues that other sanctions deter international banks, shipping firms, and insurers from doing business with its producers.
Russia temporarily withdrew from the deal in November 2022, accusing Ukraine of launching a "massive" drone attack on its fleet in Crimea from vessels in the safe shipping corridor in the Black Sea.
Restrictions on Russian Grains and Fertilizers Due to Removal of SWIFT Banking:
In addition to the controversy surrounding Ukrainian grain transit, there are also concerns about Russian grains and fertilizers. In recent years, the EU has imposed restrictions on Russian imports due to the removal of SWIFT banking, which has made it difficult for Russian companies to do business in Europe.
These restrictions have had an impact on the global food market, as Russian grains and fertilizers are a major source of food for many countries. Some experts argue that the restrictions are necessary in order to ensure food safety and security, while others argue that they are unfair and could lead to higher food prices.
The United Nations' Proposal to Russia:
The United Nations Secretary-General Antonio Guterres has proposed to Russian President Vladimir Putin that he extend the Black Sea Grain Initiative deal in return for connecting a subsidiary of Russia's agricultural bank to the SWIFT international payment system. Russia has demanded the reconnection of the Russian agricultural bank Rosselkhozbank to the SWIFT international payment network, which was cut off by the European Union in June 2022 over Russia's invasion of Ukraine.
Guterres has proposed that Russia allow the Black Sea grain deal to continue for several months, giving the EU time to connect a Rosselkhozbank subsidiary to SWIFT. Guterres sent a letter to President Putin proposing a way forward to further facilitate Russian food and fertilizer exports and ensure the continued Black Sea shipments of Ukrainian grain. The objective is to remove hurdles affecting financial transactions through the Russian Agricultural Bank and simultaneously allow for the continued flow of Ukrainian grain through the Black Sea.
Political Tensions Surrounding the Black Sea Grain Initiative:
The Black Sea Grain Initiative has been at the heart of a political chess game between Ukraine and Russia, with the United Nations acting as the mediator. Diplomatic tensions have risen among the Black Sea Grain Initiative partners, with Ukraine, Russia, Turkey, and the United Nations meeting to discuss the deal's future. Poland and Hungary have even banned imports of farm products from Ukraine, with both countries citing the need to protect their own markets.
The Impact on Africa and Developing Countries:
The Black Sea Grain Initiative has benefited people throughout the world by bringing more food products onto the global market and reducing global prices. The UN warned that 44 million people in 38 countries were facing "emergency levels of hunger" before the initiative was signed. The UN's Joint Coordination Centre has shipped 625,000 tonnes from Ukraine for humanitarian aid in Afghanistan, Ethiopia, Kenya, Somalia, Sudan, and Yemen.
Of all the food products Ukraine has exported under the grain deal, 47% have gone to high-income countries, 26% have gone to upper-middle-income countries, and 27% have gone to low and lower-middle-income countries such as Egypt, Kenya, and Sudan.
The Future of the Black Sea Grain Initiative:
The Black Sea Grain Initiative's future is uncertain, with Russia threatening to pull out of the deal if its demands are not met. The United Nations has proposed a solution that would extend the deal while allowing for the reconnection of the Russian agricultural bank Rosselkhozbank to the SWIFT international payment network. Ukraine's economy, which heavily relies on agricultural exports, may be further affected if restrictions on Ukrainian grain exports continue. The political tensions surrounding the Black Sea Grain Initiative may also hinder its success in the future.
Conclusion:
The Black Sea Grain Initiative has been critical in addressing the global food crisis, ensuring the availability of grain and related foodstuffs to millions of people worldwide. The initiative has helped stabilize global food prices, with food prices dropping 23% from their peak in March 2022. Ukrainian grain has been a major driver of the initiative, with the country's high-quality grain being prized by many countries for its nutritional value. However, the initiative faces challenges, including contamination of Ukrainian grain, restrictions on Russian grain exports due to Western sanctions, and the reluctance of Russia to extend the grain deal. The UN has been playing a critical role in ensuring the continuity of the initiative, recognizing the importance of grain supplies to the developing world. The EU's support for the initiative has also been critical in ensuring the continuity of grain supplies to the developing world. The future of the Black Sea Grain Initiative remains uncertain, but the UN and its partners are committed to ensuring the continuity of grain supplies to the developing world.
-Tsar